Three weeks after Superstorm Sandy devastated the northeast,
Leon Cooperman is still homeless.
To be clear, his home in New Jersey was not affected. But
the Omega Advisor founder’s offices at 88 Pine
Street, just south of the South Street Seaport in lower
Manhattan, are a different story. That part of the city was
flooded with 35 feet of water during the storm.
Cooperman and his 40 employees and consultants at Omega
Advisors are still scattered around the tri-state area, with
Cooperman and about five other people working out of
Goldman Sachs offices at 120 Broadway, another dozen from
unused space at UBS (not its main office) and still others
working from their homes. Cooperman estimated just before
Thanksgiving that he would be allowed back in his offices by
the Board of Health in 10 days to two weeks, although it still
has no phone service. Verizon has given him no estimate as to
when he can expect the phone lines to be restored.
But Cooperman wants people to know he is not complaining.
"Our problems pale in comparison with people who were wiped
out," he says. "It is an inconvenience."
Omega has not missed a beat, however. The fund, founded in
1991, had $7 billion under management at the end of October and
was up about 27 percent through the third week of November,
making it one of the year’s best hedge fund
performers. The firm has earned gains from positions in
structured credit, coupled with good stock selection and a
large net long position because Cooperman felt stocks were
cheap earlier in the year.
Some of his biggest holdings this year have done very well.
For example, Sallie Mae, his largest position earlier in the
year and his second largest at the end of the third quarter, is
up 26 percent year-to-date. AIG, his largest holding at the end
of the third quarter, is up over 40 percent, while Apple is up
over 38 percent.
While Cooperman still thinks now is a good time to be an
equity investor, he is still mindful of the macro picture. Like
everyone, Cooperman is now closely watching how Washington
deals with the so-called fiscal cliff. He says Congress and
Obama need to sit down and figure out what the proper marginal
tax rate should be for wealthy people, and then size the
government to reflect the new tax flows. He also believes the
government should institute some sort of VAT (value-added
On the spending side, he emphasizes the need to get health
care costs under control and advocates raising the eligibility
age for receiving Social Security to 70, except for individuals
who are engaged in what he calls "hard labor," a proposal he
advocated more than a year ago.
Will lawmakers in Congress make these kinds of hard
decisions and avoid the market and economic catastrophe that
many are predicting? Cooperman thinks they will. "The folks in
Washington are not that moronic," Cooperman says.
The fiscal cliff issue does not really affect how he
invests, he says. Cooperman generally feels the market is in a
zone of fair value. And he expects the market will remain in a
trading range for the next two to three years until there is a
meaningful deal to de-leverage.
But this does not mean investors can’t make
money during that period. To emphasize his point, he notes that
the Dow Industrials traded at the same level the day he began
working in early 1967 right after graduating from Columbia
Business School and 15 years later.
More recently, he points out the S&P 500 stood at 1527
in March 2000 when the market peaked and at 1565 in October
2007 and is currently trading at 1388. Yet, during the
intervening time, he has been able to make a lot of money.
"The good news is stocks are the best house in the financial
asset neighborhood," he has been saying for some time now,
noting that cash is essentially paying zero, U.S. government
bonds are trading to yield just 1.7 percent — which he
calls "a farce" — and even spreads on junk bonds have
tightened to record levels compared with comparable government
Equities are trading below their historical valuation and
are cheap compared with fixed income and cash, he says.
Emphasizing that he is a bottom-up investor, Cooperman says his
favorite sectors are health care, energy and financials.
Although he won’t name specific names, you can
bet Verizon is not among them.